Industry divided over early state pension access plan

Proposals to allow some women to take their state pension early have split the industry amid concerns the reform would open up a “litany of problems”.

The Work and Pensions committee is exploring letting women born in the 1950s who say they were not given enough notice of changes to their state pension age access their pensions early, but at a lower rate.

At the same time former CBI director general John Cridland is leading a review of the state pension age. Calls have also emerged for a flexible state pension age for all pensioners, not just the affected women.

Former pensions minister Steve Webb, now Royal London director of policy, says by the time the Government could allow early access, most of the women would already be drawing their pension.

He adds: “Giving all workers greater flexibility on state pension ages might be an option for the longer term, particularly if there was clear blue water between the headline rate of the state pension and the poverty line.

Otherwise this would mainly be of interest to better-off retirees who could combine a state pension drawn at a reduced rate with other sources of income. For those with little other income, surviving for 20 to 30 years of retirement on a pension below the poverty line would probably not be a viable option.

“There would also be huge complexity as the DWP would have to invent rules to ensure people who received a reduced state pension by drawing it early did not simply claim back the shortfall through claiming higher means-tested benefits.”

Old Mutual Wealth pensions expert Jon Greer says early access creates a “litany of problems”, including calculating the discount, predicting take-up and taking into account the impact on benefits.

But Aegon regulatory strategy director Steven Cameron says the interaction with means-tested benefits should not influence the debate.

He says: “The Government should consider allowing all individuals the choice of taking their state pension from an earlier age at a reduced level. With state pension age scheduled to keep increasing, we need a solution for those who are simply unable to work into their late 60s because of job demands or health concerns.”

Two years ago the state pension was being promoted as the safety net justifying pension freedom. Any reactionary change to that on the back of a campaign that has limited support even amongst the cohort of women affected is surely a retrograde step.